Irvine Co.’s Land May Face New Revaluation

Even as the Irvine Co. and the Orange County assessor’s office are in the midst of a $32-million property tax battle, Assessor Brad Jacobs has won a ruling from the state that could trigger yet another reassessment of the holdings of the giant landowner.

Jacobs initially reassessed the company’s nearly 68,000 acres of land last year, ruling that developer Donald Bren’s acquisition of controlling interest in the company in April, 1983, constituted a change of ownership and triggered a mandatory reappraisal. That boosted the Irvine Co.’s tax bill from $19 million to $51 million--an increase the company is fighting.

Now, acting at the request of Jacobs, the State Board of Equalization has ruled that the November, 1983, merger of the Irvine Co. and Newco I Corp. of Michigan constituted a second change of ownership for the local company. Although Bren was the majority owner of both corporations, calling the merger a change of ownership exposes the Irvine Co.’s massive landholdings to a potential reappraisal under terms of state law.

In its initial reappraisal, the county valued the Irvine Co.’s land holdings at $3.1 billion and assessed the company about $51 million in property taxes. However, the company has disputed the county’s change of ownership claim and appealed the bill. The appeal is pending before the county’s Assessment Appeals Board.

Although the latest ruling on the November, 1983, transaction could expose the company to yet more tax battles, Irvine Co. Vice President Gary Hunt downplayed its significance.

“How much can the value of the land have changed in seven months?” Hunt asked, referring to the ongoing battle over the April, 1983, reappraisal. “Obviously not much, especially at a time when real estate values were dropping in the county.”

Assessor Jacobs said his staff still is evaluating the new ruling to determine how to proceed. However, he acknowledged that it could trigger another reappraisal. “A reassessment may occur after the situation has been analyzed,” Jacobs said. “But it will take some time to analyze it.”

Jacobs said the latest ruling would be considered entirely separate from the ongoing reappraisal and tax dispute. “It’s a separate event,” Jacobs said of the November merger. “These two transactions have nothing to do with each other. They each exist in a vacuum chamber.”

In the current dispute, the Irvine Co. is contesting the county’s contention that Bren’s purchase of an additional 50% of the company’s stock in April, 1983, was a change of ownership under terms of Proposition 13, the 1978 voter-approved initiative limiting property taxes in California. Additionally, the company is challenging the basis of the county’s reappraisal of the land.

The company has claimed that, even if Bren’s purchase was an ownership change, the reappraisal ought to be conducted on the basis of the $1-billion value that Bren’s purchase established for the company. The company has cited Proposition 13 as the basis of its contention because the measure linked reappraisals to property sale prices.

Jacobs, however, has contended that sale price is but one indicator of land value and is not always the most reliable one when much of the land is undeveloped, as is the case with the Irvine holdings.